Financial Regulation in the English-Speaking Caribbean: Is it Helping or Hindering Microfinance?

This report presents the results of an investigation requested by the Multilateral Investment Fund of the Inter-American Development Bank under its Caribbean Microfinance Capacity Building project (CARIB-CAP) to strengthen microfinance in the English-speaking Caribbean. It analyzes the extent to which the regulation of financial entities in the region is supporting or inhibiting microfinance development.The report examines the case for regulation, differences between prudential and non-prudential regulation, differences in regulatory arrangements among countries in the region, and impact of these regulations on the availability of microfinance services and on the different types of financial institutions that provide these services. Conclusions include:

• Credit unions are important providers of microfinance in the region;
• They need to be analyzed in terms of their regulation and their approach to microfinance;
• Inappropriate aspects of prudential regulation and supervision are not the only reasons that microfinance has been slow to prosper in the English-speaking Caribbean;
• Identifying other barriers might help to further the progress being made by CARIB-CAP in spreading microfinance in the region;
• It is important to monitor the extent to which risk-based supervision is being effectively implemented.